An Inventor Takes on Japan Inc.

He's suing his former employer for millions over patents

Shuji Nakamura has always been a rebel at heart. After completing a master's degree in electrical engineering in 1979, he didn't chase a research post at a big, prestigious company. Instead, he joined Nichia Corp., a small chemical venture in western Japan, where he figured that he would have the freedom to pursue research in semiconductor lasers. Ever the maverick, Nakamura opted to work with gallium nitride, a material few believed had much promise. In 1989, when Nichia's president ordered him to focus on something else, Nakamura ignored him and continued his research.

His determination paid off. In 1993, Nakamura and Nichia trounced rivals at multinationals such as Sony Corp. and General Electric Co. when they announced that they had developed the first high-quality, blue-light-emitting diode (LED) that would eventually replace the light bulb. Two years later, they unveiled a new blue laser that will make it possible, among other things, to store 10 movies instead of one on a DVD.

Now Nakamura is looking to be properly compensated for what everyone agrees is a landmark innovation. Since quitting Nichia two years ago to become a materials professor at the University of California at Santa Barbara, the 47-year-old scientist has launched a lawsuit against his former employer. Nakamura wants a share of both the patent rights and the profits from the technology that made the blue LED possible. By daring to sue, Nakamura has become a hero to Japanese researchers, who are responsible for some of the most lucrative innovations of the postwar period but have little to show for their efforts. "Japan owes much of its prosperity to its talented engineers," says Nakamura. "But no matter how great their contribution, few receive compensation that matches those of their senior managers."

The trial--and the debate it is generating--comes at a crucial moment. With its economy teetering, Japan urgently needs to promote innovations in science and technology to build the industries of the future. Without adequately rewarding its researchers, say Nakamura and others, Japan risks forfeiting its technological edge and losing its best talent to the U.S. and other nations. "The brain drain is starting," says Katsuya Tamai, a University of Tokyo professor specializing in intellectual-property issues. "Increasingly, talented science majors studying in the U.S. are electing not to return home."

CHANGE THE LAW. What's the answer? Nakamura's lawyer, Hidetoshi Masunaga, aims to force a revision of Japan's patent law with the suit against Nichia. "The law leaves the decision of how much to compensate an inventor solely to the company," he says. Indeed, regulations simply state that an employer should "adequately" compensate an employee for a patent. As a result, most companies choose to pay no more than $300. Masunaga believes that Japan should adopt the U.S. model, wherein researchers set out their rights in clear employment contracts. The more qualified the candidate, the bigger the share of earnings.

The Nakamura shokku, or shock, is already yielding results. Tokyo University's Tamai, an expert in Japan's patent law, says that reform-minded bureaucrats in the Economy, Trade, & Industry Ministry are lobbying for revisions--possibly before the Nakamura trial winds up, in a year's time. "Trade officials are worried Japan could go down the drain if they allow companies to continue to take advantage of their engineers," says Tamai. "Companies don't seem to realize they're tying their own noose."

If Nakamura wins, many more scientists could sue their employers. That's because he is demanding a $16 million share of the $1.4 billion in sales Nichia is believed to have earned from the original patent. He also wants 80% of the key patent so that he can license it to other companies. And if he does win a major settlement? "I'd like to support some ventures," he says. Good idea, Nakamura-san. Just make sure your own researchers get a piece of the action.

By Irene M. Kunii in Tokyo

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